Textron Q2 Earnings: Growth At Bell And Industrial Drive Overall Revenues

As expected, Textron (NYSE:TXT) managed to deliver a rather solid earnings this time around, beating both the revenue and earnings consensus estimates by a comfortable margin. Aviation and Systems saw revenues shrink again on the back of lower product deliveries, while sales at Industrial jumped significantly, driven primarily by the Arctic Cat inclusion. Additionally, for the first time in many quarters, Bell has reported a positive growth in its top line on higher military volumes.

That said, the remainder of 2017 is expected to be quite slow for the conglomerate, which is vastly affected by the world economy and oil prices. Given the unfavorable global economic climate at the moment, we can continue to see the company suffer the implied consequences across most segments.

The company reiterated its full-year earnings to lie within the range of $2.40-$2.60 per share to accommodate for the costs associated with the latest Arctic Cat acquisition. Revenues are expected to remain relatively flat year-over-year.

Key Takeaways:

• Slow turboprop production continues to remain a major point of concern for Textron Aviation. While jet deliveries remained resilient in the quarter, deliveries of the King Air and the Cessna Caravan lagged notably. Management has cited a slow international market as the main cause for the sluggish demand. Additionally, a combination of adverse foreign currency realization, and the company’s decision to hold firm on its business aircraft pricing, has also hurt demand over the quarters.
• The company’s super-midsize Longitude jet is expected to be certified later this year. The jet has already created quite a buzz in the market thanks to its extended range, useful load, and high speeds. The high superiority of the jet, in terms of performance and pricing, definitely gives Textron a major competitive edge over other manufacturers in the market. We can expect sales from the jet to help buoy the top line over the long term.
• Revenues at Bell have finally managed to cross into positive territory on the back of higher military volume. On the commercial side, order flow in the quarter improved significantly. Additionally, the company’s Bell 505 Jet Ranger X has finally received FAA certification, as orders continue to swell. Sales from the aircraft are expected to help Bell’s top line significantly going forward.
• Industrial revenue marked an 11% increase, reflecting the impact of a full quarter of Arctic Cat. As synergies start getting realized, we can hope to see bigger jumps in the top line in the future. Additionally, as expected, the company’s ELiTE Lithium powered golf car continues to gain heavy momentum in the marketplace. Since its introduction, Textron has managed to deliver more than 8,000 units.

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